Buying a home to rent is still a very popular investment alternative in southern Europe. In fact, Spain, Portugal and Italy are the countries where most individuals are interested in this way of making their savings and assets profitable, according to a study by Masteos.
The French company specialising in turnkey rental investment, which began operating in the Spanish market last September, claims that in the 3 southern economies of Europe at least 2 out of every 3 savers are interested in buying property for rental, far exceeding the figures for their Central European counterparts.
Based on a survey of more than 8,100 European citizens, the study places Spain as the only country analysed where more than seven out of 10 individuals show interest in investing in rental housing (72%). The next highest figures are for Portugal (67%) and Italy (64%), while the rest of the economies are below 60%.
In the UK, for example, 58% of individuals say they are interested in buying a home to rent, while in France the figure drops to 56% and in Belgium to 54%. But the lowest results are in Germany, where only 41% of individuals are interested in investing in rental housing; and the Netherlands, which closes the ranking of the large economies analysed with 34%.
Within the southern countries' commitment to residential investment, their preference for bricks and mortar over other financial alternatives such as savings accounts, shares in listed companies or cryptocurrencies stands out. In the case of Spain and Portugal, real estate investment is the favourite option of individuals, while the English and Dutch prefer savings accounts, as do the Italians.
The study also highlights that the majority of Spaniards, including those under 35, "consider rental investment as a perfect option as a first investment, which is also safe and without financial risk". Currently, at least, housing remains a profitable alternative considering that we are in a time of inflation, that traditional banking products such as deposits still do not offer a high return and that volatility has returned to the stock market in recent weeks, driven by fears of a new global banking crisis.
Despite this, not all individuals surveyed plan to invest in housing. According to the survey, "17% of Spaniards say they have already made an investment in rental housing. This figure is added to by a further 12% who say they want to make a rental investment in the next 12 months. On the other hand, among those who do not plan to invest in rental housing, 45% express interest in this type of investment, while only 26% are not interested in this type of operation".
With regard to the reasons for this lack of interest, the most prominent is the lack of financial means to undertake an investment, "ahead of the problems linked to this type of investment, and the preference to invest in a home in which to live". In addition, those surveyed with a lower income consider that buying a property to rent it out is an alternative reserved for people with a high purchasing power.
Average yield of 7% in Spain
According to the latest data from idealista, the gross profitability of buying a property to rent stood at an average of 7.1% in Spain in the first quarter of the year. Among the Spanish capitals, Lleida is the most profitable, with 8.3%, followed by the cities of Jaén and Murcia, with 7.8% in both cases.
Huelva (7.5%) and Teruel (7.2%) have yields of over 7%. Almería and Castellón have gross yields of 7%. On the other hand, San Sebastian is the city with the lowest profitability (3.6%), followed by A Coruña and Palma (4.7% in both cities), Pamplona and Pontevedra also share the same percentage (4.8%). In Madrid, the profitability reaches 4.9% and in Barcelona it is as high as 5.4%.
The national average yield (7.1%) is in line with that currently offered by garages, although it far exceeds that of the Spanish 10-year bond (3.2%). If we focus on the purely real estate market, the highest yields are in offices (13.1%) and commercial premises (9.7%), although it all depends on factors such as location or the condition of the property.
"In our case, the average investment ticket is between 100,000 and 150,000 euros in total (including the purchase of the property, fees and renovations) and the profitability is between 7% and 8%, although we have achieved a profitability of up to 15% in some projects. The profitability of housing has been positive even in times of crisis," says Beatriz Toribio, deputy director of Masteos in Spain.
As for the type of investor, Toribio points out that they tend to be individuals with a certain level of savings and who have no problem obtaining financing for the purchase of a home thanks to their solvent profile. In addition, they usually already own a property. The majority are national clients, although foreign clients are also growing (especially French or residents in Spain) and Spaniards living in other countries.
Regarding the type of rental, Masteos detects a growing interest in renting rooms, although there are also investors who prefer more stable leases with a long-term tenant. In terms of locations, Madrid and Valencia are the large cities that are attracting most interest, ahead of Barcelona, although other locations in the metropolitan areas (such as Alcorcón or Getafe in the case of Madrid) and other smaller, but in demand, such as Gandía in the case of Valencia or Talavera de la Reina (Toledo), are also gaining prominence.
A market on the rise
Toribio is confident in the future of rental housing in Spain. Specifically, she reminds us that "housing is the main source of savings for Spaniards, however, only 10% of the purchase and sale transactions carried out in our country are for renting, compared to 30% in France, 21% in Germany or 17% in the United Kingdom, according to our data". Therefore, she adds, "it is a market that can grow more because it is still very small in Spain, but the investment is very profitable and arouses a lot of interest among Spaniards".
In addition, she argues that this investment not only allows individuals to make their savings profitable for retirement and have an economic cushion for unforeseen events, but also "helps to solve part of the serious problem of rental housing supply that we have in our country".
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